The incidence of extreme economic stress: Evidence from utility disconnections

Abstract

This paper uses monthly zip code-level data on electricity disconnections in Illinois to document the socioeconomic correlates of extreme economic distress among 5 million customers. In 2018–2019, customers in Black and Hispanic zip codes were about 4 times more likely to be disconnected for non-payment, 2–3 times more likely to be on deferred payment plans, and 70% more likely to participate in utility-based low-income assistance programs, controlling for zip code distributions of income and other demographic characteristics. During the COVID-19 pandemic, there has been a ninefold expansion in low-income assistance to pay utility bills, but disconnections were double and deferred payment plans triple their historical averages in October 2020. Disconnection notices were served to 2.5% of commercial and industrial accounts, and 3.4% of residential accounts each month in late 2020. About 20% of all accounts were charged late fees. The odds for each of these measures were multiples higher in minority zip codes.